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Vital Signs: Evergrande may survive, but for its executives expect a fate worse than debt

By Richard Holden, Professor of Economics, UNSW
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A large, financially interconnected company is on the verge of collapse, weighed down by massive debt. The government ponders a bailout. There’s no easy answer. Doing nothing risks serious financial upheaval. But bailing it out will signal that greed, irresponsibility and moral hazard have no consequences.

It’s a tough call. And if this all sounds eerily familiar, then you’re right. In 2008 the US government faced the dilemma with what to do about Lehman Brothers, the nation’s fourth-biggest investment bank which found itself unable to pay debts totalling more than US$600 billion.

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